Is Solid Rise in China’s Manufacturing PMI Reducing Trade War Worries?

China’s manufacturing PMI in May 2018

China’s manufacturing PMI (purchasing managers’ index) report for May signaled a solid rise in the manufacturing activity during the month. It stood at 51.9 in May as compared to 51.4 in April, which beat the market’s expectation of 51.3.

Is Solid Rise in China’s Manufacturing PMI Reducing Trade War Worries?

Let’s analyze some of the key components of China’s manufacturing PMI in May:

  • Production volume and output growth improved at a higher rate in May as compared to April. It stood at 54.1 in May as compared to 53.1 in April.
  • New orders growth also rose at a faster rate in May. It stood at 53.8 in May as compared to 52.9 in April. Similarly, export orders also rose at higher rate during the month. It stood at 51.2 in May as compared to 50.7 in April.
  • Employment in the manufacturing sector stood at 49.1 in May as compared to 49.0 in April.

Despite the rising concern about the trade war between the US (SPY) and China, China’s manufacturing activity rose sharply in May. The improving domestic demand in the economy is mainly supporting the movement of major indexes and ETFs of China. Businesses are also marginally positive about the country’s demand outlook.

Performance of major ETFs in May 2018

The iShares MSCI China ETF (MCHI) and the Xtrackers Harvest CSI 300 China A ETF (ASHR), which track the performance of China (YINN) (FXI), returned 2.9% and -0.67%, respectively, in May.

In the next part of this series, we’ll analyze the performance of China’s services PMI in May.